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Commodities wrapped; shipping chaos; OPEC frictions

While the robusta price had the largest gain this week (~11%) due to ongoing drought and dry conditions in Vietnam and Brazil, the rebound in oil prices captured most of the attention, as this was seemingly driven by the shipping chaos. A perfect storm has erupted, as low water levels in the Panama Canal have coincided with shipping companies avoiding the Suez Canal following attacks by Houthi rebels in the Red Sea.

We outlined our thoughts on the implications for commodities and global inflation here and here. In short, for commodities, given that there is no disruption to the production of commodities the costs are likely to accrue elsewhere, most likely in the processing of commodities for intermediate goods. Accordingly, we doubt that any commodity price rises due as a result of this shipping chaos are likely to last.

The release of China’s PMIs (31st Dec. & 2nd Jan) and US non-farm payrolls (5th Jan.) will be the next key data releases that will reveal how the two largest economies are faring. Meanwhile, this will be the last Commodities Weekly Wrap of 2023. The next edition will be published on 5th January 2024.

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